Reinsurance, Functions and Values This is based in part on an article written by the same author and published in Foundations of Casualty Actuarial Science, Fourth Edition by the Casualty Actuarial Society (2001).

Abstract The functions of reinsurance vary by contract and by the relationship of the insurer and reinsurer. The functions that may be emphasized or de‐emphasized by a particular reinsurance arrangement are for the reinsurer to provide the cedant with additional underwriting capacity, to help stabilize the cedant's underwriting and financial results, to help manage the cedant's financial results and to provide management advice. The value of reinsurance is exactly parallel to that of insurance. Insurance reduces the variability of the financial costs to individuals, corporations, and other entities arising from the occurrence of specified contingent events. Reinsurance reduces the variability of the financial costs to insurance companies arising from the occurrence of specified insurance claims. Thus, its value is to further enhance innovation, competition, and efficiency in the marketplace.